A Transformer is Electrical equipment built to convert alternating current from one voltage to another. It can be built to step up or step down voltages and works on the magnetic induction principle. In this article, we will discuss about insurance for transformers

A transformer has no moving parts. And as such, a complete static solid state device which enure under normal working conditions a long and trouble-free life. It consists of two or more coils of insulative wire wound on a laminated steel core.

Electric transformers operate on the principle of magnetic induction as earlier mentioned and have no moving parts. When a transformer translates the voltage on the input site to the voltage required by the device or equipment connected to the output, it increases or decreases the current flow between the different voltage levels.

Electrical transformers being equipments that have no moving parts or largely sensitive essential component, or materials, are naturally reasonably reliable and durable pieces of electrical equipment. A well designed and quality built transformer can be reasonably expected to function effectively and trouble free for years under rated operating conditions.


The commonest trouble of a transformer is electrical failure which involves line surges. And this line surge is the common cause of transformer failure. Voltage spikes, switching surges and line faults are few common culprits of electrical failure. And equally, when there is exothermic reaction due to faulty wire or overload, it causes significant surge in temperature resulting in spikes that causes the transformer to catch fire and explode.

The cost of replacing a transformer runs in several millions of dollars (USD). Transformer explosions and fire results in;

  1. Income loss
  2. Purchase of highly-priced replacement power
  3. Replacement of transformers and its surrounding equipments
  4. Environmental pollutions.


The damage caused largely depends on the location of the transformer. For example, in the case of power plant incidents, it will usually occasion a very high loss of revenue. And it is capable of leading to company bankruptcies if it is not insured.

Secondly, if it is transmission substation incidents, the damage to the transformer can lead to total blackout of a country.

Lastly, if it is a distribution substation/transformer and it explodes which most times happens in urban areas, the explosion can result to disastrous and catastrophic financial implication from related pollution and litigations costs.

Since most industrial companies and even households use power to produce something, the risks connected with the loss of such power have most times been misunderstood. And sometimes been ignored. But the risks come in different forms. And risks of transformer failures may be quantified by the insurance company as the cost of replacement of the transformer. But the business interruption loss and the loss of production capacity of the industries are usually higher than the monetary costs of replacing the transformers.

Many transformers failures happen after some incidents such as lightening strike or a failure somewhere downline or from the transformer. These failures can be electrical, mechanical or thermal. And when these breakdowns occur, the life of the transformer automatically get to an end.

Transformers most times fail without warnings. More so, transformers built today are done with smaller margin for error than those of the past. And if we now take the same approach to reliability as we did before with the equipment of the past, we will definitely see more outages and downtime from transformers failures than ever before.


The above having been said, the need the need to purchase an insurance coverage becomes very imperative. But the question remains, do insurance companies get life insurance or car insurance? And our answer to the above question remains that a transformer requires a life insurance policy. But not a car insurance policy.

A transformer has no moving parts. And is a completely static and solid device which inures under normal operating condition, a long and reliable free life. Although this can be cut short by damage to the transformer. Hence, the need to insure the transformer life against damage to it as a result of fire or eventual explosion. Which are usually caused by sources within the transformer such as power surges, electrical shorts etc. Thus, transformer insurance covers uncertain and sudden physical loss of or damage to the transformer. And necessitating their repair or replacement.


Just like other businesses, electric generators and transformers need insurance coverage against the life of such generator or transformer. And against exposure to legal action being taken against you in respect of your legal liability arising personal injury or property damage during the life of the transformer or power generator or at the point of the damage. For instance, fire outbreak in the neighborhood as a result of spikes from the transformer.

Claims in respect of these liabilities can be expensive to defend. And even more costly if you are legally liable. However, your electric generators and turbines and transformers insurance is there to protect you against these losses by providing you coverage in respect of awards made against you. And the defense of any claim and as well as the repair or replacement of the transformer.

These liabilities covered by your insurance for transformers can be of two folds

  1. Public liability claims which operates to protect you against claims against you in respect of your legal liability for personal injury or damage to third parties
  2. Employer’s liability which will protect you against claims in respect of your liability for death, disease or injury to your employees during the discharge of his work on the transformer.

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